Macro: Sandcastle economics
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Morning Brew January 13 2023
Erik Schafhauser
Senior Relationship Manager
Summary: CPI mostly bullish - Earnings Kick Off
Good Morning and happy Friday the 13th for all who care.
The CPI yesterday came basically in line with expectations, the only deviance being the monthly seasonal number that came at -0.1% vs 0.0% expected. Initial comments were fairly dovish – Fed Speakers indicate hikes of only 25 BPS not 50. So far, there is no direct hint at cuts. The probability of a 25 bps hike rose to 90% and the peak rate is at 4.90% in June and the 10 Year rate fell to below 3.5 to trade at 3.44
The market did not move as much as feared or hoped with the Dow up 0.6%, S&P 500 up 0.3%, Nasdaq up 0.6%, the Dax Future broke resistance and could rise to the rose to 15600 area
The USD Index fell to below support and could well target the 100, EURUSD is trading at 1.0850, GBPUSD 1.2205 and USDJPY 128.50. Gold is testing the 1900 and Silver continues to struggle with the 24 figure – 23.75 at the moment. EURCHF is holding above parity having 1.0080 at the moment.
Crypto had a great day and Bitcoin rose to 18850 and Ethereum to 1410.
Chinese trade data was released over night much loser that previously but slightly better than expected: Exports -9.9 vs -10 expected and Imports at -7.5% vs 9.8% expected.
After the CPI release I expect three initial market movers coming up:
- Comments from Central bankers on the implication
- The Consumer sentiment today at 1600 CET to give forward looking guidance
- The kickoff of the earnings season with Bank of New York Mellon, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, First Republic Bank also BlackRock and Delta Airlines before US Market open today.
Given the job-cuts announced by Goldman Sachs, Bank earnings may well disappoint even if the six larne US banks are also expected to report a 17% drop in net profit in the fourth quarter. The Bank Index has risen app. 6% so far this year.
Volatility in FX is particularly high relative to the implied volatility making options worth taking a look at in my view.
Data:
- U.S. U of Michigan Consumer Sentiment (Jan, preliminary)
- Eurozone: Industrial production (Nov)
- UK: Monthly GDP (Nov)
- Japan: Money supply (Dec)
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